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12:40 AM 13th November 2021
business

Market Analysis: M&S & AstraZeneca



Ross Hindle, analyst at Third Bridge, comments on M&S: “Marks & Spencer’s H1 statutory revenue grew to £5,105.3m in line with consensus. M&S Food grew c.10%y/y while clothing and retail sales were down 1%y/y.

“Food continues to be the star performer for M&S, with the Ocado partnership now sizzling. M&S products already account for c.29% of the Ocado basket, and given Ocado’s expansion plans, the growth outlook in this category looks tasty for M&S.

“However this bright spot can’t mask M&S’s structural challenges, particularly in clothing & home, where the store experience, fashion proposition and clothing range remains far off its competitors. M&S's proposition continues to draw consumers towards the upper end of the target 35-55 target age range, with the Group unable to shake its "out-dated" fashion label.

“Management’s strategy of targeting more family-based shoppers in food is interesting, with specialists citing brand-equity dilution and a loss of high-end food-to-go customers. Couple this with the UK’s embrace of hybrid working and you’re looking at a heavy drag on M&S's performance.

“Cost & supply chain pressures continue to plague the industry, with M&S being no exception. Cost price increases are expected to be double-digit as pressures remain; however it is expected that consumers will only feel the pain post the festive season as retailers will want to maximise the Christmas demand before hiking up prices.

“M&S will be desperately trying to plug gaps in their supply chain as we head into the Christmas boom period. Consumers should expect less extravagant ranges and less promotional activity as retailers try to navigate such challenges.

“Tailored, value-add products might be in short-supply during the festive season as manufacturers continue to struggle with labour shortages. Products, such as pig-in-blankets, are labour intensive and, while they might be margin accretive, they might also face the chop.“


Sebastian Skeet, Senior Analyst for healthcare sector clients at Third Bridge comments on AstraSeneca

“AstraZeneca’s earnings reflect an impressive quarter for big pharma, but a wealth of growth drivers sets this company apart”

“Q3 2021 has seen a number of the big pharma cohort beat analyst estimates and raise Q3 guidance. This morning AstraZeneca did neither, missing analyst EPS estimates and maintaining guidance, despite reporting higher than expected product sales growth, at 32% CER excluding the vaccine, and 15% growth in core EPS. On a reported basis, AstraZeneca posted a loss, although this was mainly driven by the necessary investments to support the burgeoning pipeline.

“AstraZeneca’s top-line beat was impressive, and in the context of continued vaccine rollouts, booster doses and the impressive data from Merck’s and Pfizer’s antiviral pills, perhaps this points to a normalisation of the market environment.

“AstraZeneca finds itself with an enviable number of late stage pipeline candidates to fuel growth in the coming years. The crown jewel, its oncology franchise, goes from strength to strength with Enhertu continuing to impress our experts in breast cancer, with further potential upside in gastric and lung cancers, as well as Lyparza impressing with the recent top line data in prostate cancer. The rare diseases franchise has been buoyed by the Alexion contribution and the respiratory franchise has drivers in place with Breztri, tezepelumab and PT027.

“AstraZeneca’s Covid-19 vaccine, Vaxzevria, remains unapproved in the US and our experts do not expect this to change. Additionally, recent data suggests that Vaxzevria’s efficacy, in terms of protection against infection, may wane faster than its mRNA counterparts. Thus, the longer term use-case for this particular vaccine may be questionable. Whilst AstraZeneca have historically sold their vaccine at cost, it appears the vaccine will transition to modest profitability serving as an additional earning tailwind in the coming quarters.

“AstraZeneca has announced a new R&D division focusing on VaxZevria, their long-acting antibody combination and an additional candidate against variants of concern.”


Third Bridge is a global primary research firm that interviews more than 6,000 internationally recognised industry experts and business leaders a year to compile 360-degree market intelligence for institutional investors. www.thirdbridge.com